How does magnetic secure transmission or MST payment works?

MST or magnetic secure transmission is a patented technology developed for equipping mobile phones with digitised payment capacity through traditional magnetic readers. It essentially and theoretically turns existing mag stripe-equipped point-of-sales terminals into contactless readers without any hardware modification.

LoopPay, Inc. developed and introduced MST as a smartphone accessory. In 2015 however, Samsung Electronics acquired the company for an undisclosed sum. The South Korean consumer electronics giant has subsequently integrated the technology into several flagship smartphone devices under the Samsung Pay branding. The Samsung Galaxy S6 and S6 Edge are the first smartphones that came equipped with MST.

History of magnetic secure transmission

The market for digital wallet and mobile payment was growing in 2008 but widespread adaptation seemed almost impossible. Most merchants and their existing POS terminals were unable to accept contactless and electronic payments because of hardware limitations.

Will Graylin and George Wallner contemplated on creating a mobile payment experience that is easy to use and universal. The fundamental idea was to turn existing mag stripe readers for credit and debit cards into contactless receivers of magnetic signals from mobile devices. They eventually founded LoopPay in 2012 and introduced MST as a series of accessories for Android and iOS smartphones.

Both Graylin and Wallner have extensive experience working in the electronic payment industry. Graylin is an MIT graduate who founded two other mobile payment companies—Way Systems that was later sold to VeriFone and ROAM data that was later sold to Ingenico.

Wallner, on the other hand, is a payment industry pioneer who founded Hypercom Corporations—a manufacturer of electronic payment hardware and software that launched the first mag stripe POS and POS network equipment. VeriFone later acquired Hypercom in 2011.

The acquisition of LoopPay by Samsung in February 2015 marked the beginning of widespread application of MST payment. The consumer electronics company first announced this under the Samsung Pay branding in March 2015. There were limited trials in some countries but actual application began in October 2015 in the United States.

How does magnetic secure transmission works?

Before Graylin and Wallner conceived MST, the emerging mobile payment technology was near field communication or NFC. Devices with an NFC chip support this technology by digitising relevant credit or debit card information, thus allowing contactless payments and replacing chip-based, tap-based, or swipe-based POS transactions. However, these devices will only work if paired with POS terminals equipped with NFC receivers. It is in this regard that magnetic secure transmission is universal because it works with existing POS terminals sporting regular mag stripe readers.

MST technology generates changing magnetic fields over a very short period by putting alternating current through an inductive loop. The magnetic read head of mag stripe readers can read these magnetic fields. To be specific, the signal received by a mag stripe reader emulates the same magnetic field change normally induced by tapping or swiping a mag stripe credit or debit card across the same read head.

Device equipped with MST such as LoopPay products or Samsung smartphones can only work within a 3-inch distance from the read head. The field dissipates rapidly beyond that point and only exists during a transmission initiated by the user.

Of course, in order to proceed with a payment using an MST device, a user should first digitise relevant credit or debit card information. This requires him or her to enter the information manually in a smartphone paired with a LoopPay device or a supported Samsung device. A user can enter several credit or debit cards, thus effectively making the device a digital wallet.

Advantages and disadvantages ofmagnetic secure transmission

Like any other contactless or mobile payment solutions such as NFC, a key advantage of magnetic secure transmission is a reduced risk for identity theft and card fraud. Contactless payment reduces the susceptibility for intercepting pertinent card information by lessening the interaction between a consumer or cardholder and a second or third party.

Another advantage involves eliminating the need to carry all credit or debit cards in a wallet or cardholder. MST payment digitises card information just like NFC or any other mobile payment solutions. A user can store several cards in his or her MST-equipped device.

However, unlike NFC or NFC-enabled mobile payment solutions such as Apple Pay and Android Pay, MST works with almost all existing POS terminals that use a magnetic stripe reader. MST-equipped devices simply work by wireless communicating with a mag stripe reader, thus overriding the need for card swiping. This means that MST payment works in any payment terminals where consumers can swipe or tap their credit or debit cards.

The technology behind MST is highly innovative because it solves the biggest problem faced by contactless and mobile payment systems—poor adaptability from the side of retailers. While near field communication seems an emerging technology for wireless communication applications, including wireless technology, not all retailers are ready to upgrade to NFC-enabled payment terminals.

Payments through MST can be tricky. One disadvantage is that unlike swiping a card or using an NFC to make contactless payments, an MST-equipped device such as a LoopPay product or a compatible Samsung phone must be held and positioned in a particular manner for it to successfully communicate with a mag stripe reader. This might be a no-brainer for some but it can still be confusing for both users and POS attendants.

A key disadvantage of MST payment will be susceptibility to obsolescence. Retailers and consumers have expressed concerns over identity theft and card fraud. POS terminals that use mag stripe readers have become more vulnerable to these over the years. These regular card readers will most likely be replaced by more secure options like chip-and-PIN one day. Photo credit: Samsung Mobile